Have We Learned From Japan's Disaster?
Guest contributor: Linda Conrad
Director of Strategic Business Risk Management, Zurich Financial Services
One year ago, the earthquake and tsunami that struck north-central Japan demonstrated just how fragile a multinational supply chain can be. The disaster in Japan revealed how optimizing supply chain logistics and cost should be counterbalanced with proactive risk management tactics.
While awareness for this essential balance is shifting, businesses still have ground to cover. According to a 2011 global study sponsored by Zurich Financial Services and conducted by the Business Continuity Institute, 85 percent of companies reported at least one supply chain disruption in 2011, yet only eight percent of companies said they ask to see their suppliers’ business continuity plans.
The Most Valuable Lesson
The 2011 disasters can teach businesses a few cautionary lessons. Clearly, companies with today’s finely tuned inventories saw that the benefits of cost-cutting efforts and just-in-time strategies can be quickly eaten up, by the financial and reputational cost of supplier disruptions. Longer-term losses like delayed production and even lost innovation only exacerbate the damage.
Another lesson was that despite the alarming images coming out of north-central Japan last March, a significant portion of the supply chain impact was not caused by physical damage at the epicenter of the catastrophe. Instead, it caused rolling brown outs in southern Japan, which negatively impacted manufacturers around the globe, making critical parts impossible to access and delaying production.
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These catastrophic events highlight the need to quantify exposures from your suppliers, and even your supplier’s suppliers, which lead to 40% of all disruptions. It is increasingly important to visualize and map out your value chain, to identify concentrations, bottlenecks and interdependencies. For example, the flooding in Thailand last fall demonstrated the importance of ensuring supplier geographic dispersion, as the long recovery shackled the hard disk drive industry.
The complex web of diverse suppliers from diverse geographies can be daunting but not unmanageable when using the right tools. The most valuable lesson learned from the earthquake and tsunami that struck Japan is that companies are beginning to think about their supply chains more broadly. They understand it isn’t just about modeling inventory but modeling disaster preparations and recovery for itself and its suppliers to ensure long term resiliency.
Elon Musk's Boring Co. planning wider tunnels for freight
Elon Musk’s drilling outfit The Boring Company could be shifting its focus towards subterranean freight and logistics solutions, according to reports.
A Boring Co. pitch deck seen and shared by Bloomberg depicts plans to construct wider tunnels designed to accommodate shipping containers.
Founded by Tesla CEO Musk in 2016, the company initially stated its mission was to offer safer, faster point-to-point transport for people, particularly in cities plagued by traffic congestion. It also planned longer tunnels to ferry passengers between popular destinations across the US.
The Boring Co. completed its first commercial project earlier this year in April. The 1.7m tunnel system is designed to move professionals between convention centres in Las Vegas using Tesla EVs. It says the Las Vegas Convention Centre Loop can cut travel time between venues from 45 minutes to just two.
Boring Co.'s new freight tunnels
The Boring Co.'s new tunnel designs would allow freight to be transported on purpose built platforms, labelled as “battery-powered freight carriers”. The document shows that, though the containers could technically fit within its current 12-foot tunnels, wider tunnels would be more efficient. Designs for a new tunnel, 21 feet in diameter, show that they can comfortably accommodate two containers side-by-side, with a one-foot gap between them.
The Boring Co.’s new drilling machine, dubbed Prufrock, can tunnel at a rate of one mile per week, which is six times faster than its previous machine, and is designed to ‘porpoise’ - mimicking the marine animal by ‘diving’ below ground and reemerging once the tunnel is complete.
Tesla’s supply chain woes
Tesla is facing its own supply chain and logistic issues. The EV manufacturer has raised the price of its vehicles, with CEO Musk confirming the incremental hike was a result of “major supply chain pressure”. Musk replied to a disgruntled Twitter user, confused as to why prices were rising while features were being removed from the cars, saying the “raw materials especially” were a big issue.
Car manufacturing continues to be one of the industries hit hardest by a global shortage in semiconductor chips. While China’s chip manufacturing levels hit an all-time high in May, and the US is proposing a 25% tax credit for chip manufacturers, demand still outstrips supply. Automakers including Volkswagen and Audi have again said they expect reduced vehicle output in the next quarter due to a lack of semiconductors, with more factory downtime likely.
Top Image credit: The Boring Company / @boringcompany